I have too many labels and lots of rules that move email into these labels. Is there any ability to merge a label into another one and have all of the current rules follow so they will move email into this new label?

Indeed. I tried a number of things to effect this, all to naught. The filters will need to be changed by hand. At least it's easy to mark all of the message with one label and apply the other.
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Al E.Apr 4 '11 at 13:08

It is totally possible to update all the filters. The basic idea is that you will export all your filters and then replace all references to the old label(s) with the new label and reimport them into Gmail.

Below are instructions on how to do this. For just a few labels you might as well go in and change each one.

In Labs there is a lab to import and export filters. Find and turn on the lab: Filter import/export

Go to filters and at the bottom click select All. Then click export.

Find the file that gets downloaded onto your computer (mailFilters.xml) and open it in your favorite plain text editor (I used TextWrangler on my Mac and notepad should work on PC).

Use Find and Replace to replace the name of the old label with the name of the new label. If your label has the same name as some other text in this document you might want to do a find and replace like the following.

Find: value='oldName'

Replace: value='newName'

Save the file.

Go back to Gmail and delete all the filters you have.

Click import at the bottom of the filters list and select the file you just modified. All your new filters should now be there.

As one of the commenters said you can easily search for everything in one label and apply the other label to those messages. You will have to do that step too after or before you do what I just outlined.

Yes, there is a way to merge two labels. Note, CAPS below are telling you the actions to perform.

On the left side, (look under the Compose button) SELECT (click) the label you want to remove or to move Gmail out of.

FIND the little square box located in the space under the word "Google" on the gmail page. - When you find the box - "CLICK the little tiny arrow pointing down" located beside the box. - After clicking the down arrow a menu will appear.

From the menu that appeared - SELECT (click) "all".

Now a list of all gmail "that you want moved" appears in the display window. Above the first gmail message in the list - FIND a line that tells you how many messages are under this label.
It shall say For Example: If there are 1102 messages in the folder1 the line shall look like this [Select all 1102 messages in "folder1"].

CLICK on the "number" in total emails moving line. - From the line above you would CLICK on the number "1102 messages". -

After doing this a message shall appear that says "All 1101 messages in "folder1" are selected." (this line is located right under the more button).

Beside the "more button" FIND the "labels icon or text button" when clicked it will say "Label as". When you see "label as" appear there is a scrolling list of labels shown below it.

CAREFULLY - In the list that appears below "Label as" UNCHECK the label to remove (click the box on the left side of the label until it is empty).

MAKE a "Check mark" in the box by the label name that you want the messages moved to.

CLICK "apply" at the bottom of the scrolling label list box.

A message is displayed "this will affect all (1101 messages) are you sure?" CLICK - OK or Yes to move all the messages to the new label. After this you should see a screen with no messages displayed and a box is shown where messages would be that says "There are no messages with this label."

The messages should now appear under the label you checked in (line 9) above. To see the messages just select (click) the label *that you checked in (line 9) above* from the list located on the left under the Compose button.

That solves the OP's first issue of getting all of the messages into one place, but doesn't solve the second of automagically changing any existing filters to now point to the new label.
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Al E.Apr 20 '12 at 18:38

I don't see how this can merge labels. If there's no parent, then it doesn't work. The parent label is always selected. What you are describing is the creation of nested folders.
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Jacob Jan TuinstraDec 21 '12 at 6:59

Sure, that's easy to do (and actually offered in a previous answer) but that doesn't change any of the filters associated with the old label, which is the second half of the Asker's dilemma.
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Al E.May 25 '12 at 14:46